Knology Inc. (KNOL, Financial) filed Quarterly Report for the period ended 2009-03-31.
Knology is a facilities-based provider of bundled broadband communications services to residential and business customers in the southeastern United States. Their service offerings include digital and analog cable television local and long-distance telephone and high-speed Internet access. They deliver their services through interactive broadband networks. Knology Inc. has a market cap of $294.1 million; its shares were traded at around $8.22 with and P/S ratio of 0.7.
Selling, general and administrative expenses. Our selling, general and administrative expenses increased 1.8% from $37.7 million for the three months ended March 31, 2008, to $38.3 million for the three months ended March 31, 2009. The increase in these operating costs is consistent with our growth in connections and customers in the first quarter of 2009, and consists mainly of increases in marketing, professional fees and installation expense. These increases were partially offset by decreases in compensation expenses and fuel cost. We incurred one-time charges of $310,000 related to travel and other PrairieWave and Graceba integration costs for the three months ended March 31, 2008 which did not occur in 2009. Our non-cash stock compensation expense increased from $572,000 for the three months ended March 31, 2008, to $1.5 million for the three months ended March 31, 2009 as a result of restricted stock grants.
Interest expense. Interest expense decreased from $11.9 million for the three months ended March 31, 2008, to $9.5 million for the three months ended March 31, 2009. The decrease in interest expense is primarily a result of the decline in interest rates on our term loan due to the PrairieWave acquisition and the additional incremental loan due to the Graceba acquisition. As discussed in the Notes to the Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2008, the Company no longer qualifies to use hedge accounting for our interest rate swaps on these debts and we recorded $4.7 million in amortization of deferred loss associated with these derivative instruments for the three months ended March 31, 2009. A gain of $706,000 was recorded on the value of the interest rate swaps for the three months ended March 31, 2009.
On March 14, 2007, the Company entered into an Amended and Restated Credit Agreement (Amended Credit Agreement), which provides for a $580.0 million credit facility, consisting of a $555.0 million term loan and a $25.0 million revolving credit facility. On April 3, 2007, the Company received proceeds of the term loan to fund the PrairieWave acquisition purchase price, refinance the Companys first and second lien credit agreements, and pay transaction costs associated with the transactions. The $555.0 million term loan bears interest at LIBOR plus 2.25% and amortizes at a rate of 1.0% per annum, payable quarterly, with a June 30, 2012 maturity date. As of March 31, 2009, $537.3 million is outstanding under the term loan and $1.8 million is outstanding under the revolving credit facility as unused letter of credits. On April 18, 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $555.0 million. The swap agreement, which became effective May 3, 2007, currently fixes $505.3 million of the $537.3 million floating rate debt at 4.977%.
Net cash used by our investing activities was $90.0 million and $34.8 million for the three months ended March 31, 2008 and 2009, respectively. Our investing activities for the three months ended March 31, 2008 consisted primarily of $75.1 million for the acquisitions of businesses, $14.3 million of capital expenditures and $653,000 of multiple dwelling unit signing bonuses. Investing activities for the three months ended March 31, 2009 consisted primarily of $20.2 million for the purchase of certificates of deposit and $14.6 million of capital expenditures.
Net cash provided by our financing activities was $57.2 million for the three months ended March 31, 2008 and net cash used by financing activities was $10.8 million for the three months ended March 31, 2009. Financing activities for the three months ended March 31, 2008 consisted of $59.0 million in proceeds from long term debt and $171,000 from the exercise of stock options, offset by $1.7 million in principal payments on debt and $205,000 of expenditures related to the issuance of long-term debt. For the three months ended March 31, 2009, financing activities consisted of $10.8 million in principal payments on debt offset by proceeds of $10,000 from the exercise of stock options.
Read the The complete Report
Knology is a facilities-based provider of bundled broadband communications services to residential and business customers in the southeastern United States. Their service offerings include digital and analog cable television local and long-distance telephone and high-speed Internet access. They deliver their services through interactive broadband networks. Knology Inc. has a market cap of $294.1 million; its shares were traded at around $8.22 with and P/S ratio of 0.7.
Highlight of Business Operations:
Direct Costs. Direct costs increased 4.2% from $31.4 million for the three months ended March 31, 2008, to $32.7 million for the three months ended March 31, 2009. Direct costs of video services increased 5.0% from $23.0 million for the three months ended March 31, 2008, to $24.2 million for the same period in 2009. Direct costs of voice services decreased 4.5% from $5.6 million for the three months ended March 31, 2008 to $5.3 million for the same period in 2009. Direct costs of data services increased 27.5% from $1.2 million for the three months ended March 31, 2008, to $1.6 million for the same period in 2009 due to the addition of data circuits and capacity to handle the increasing volume of data usage. Direct costs of other services increased 52.1% from $240,000 for the three months ended March 31, 2008, to $365,000 for the same period in 2009. Pole attachment and other network rental expenses decreased 4.3% from $1.3 million for the three months ended March 31, 2008, to $1.2 million for the same period in 2009. We expect our cost of services to increase as we add more connections. The increase in direct costs of video services are primarily due to programming costs increases, which have been increasing over the last several years on an aggregate basis due to an increase in subscribers and on a per subscriber basis due to an increase in costs per program channel. Further, local commercial television broadcast stations are charging retransmission fees beginning in 2009, similar to fees charged by other program providers. We expect the trend of annual increases to continue and we may not be able to pass these higher costs on to customers because of competitive factors, which could adversely affect our cash flow and gross profit. We expect increases in voice, data and other direct costs of services with the additions of leased facilities used to backhaul our traffic to our switching facilities as connections and data capacity requirements increase.Selling, general and administrative expenses. Our selling, general and administrative expenses increased 1.8% from $37.7 million for the three months ended March 31, 2008, to $38.3 million for the three months ended March 31, 2009. The increase in these operating costs is consistent with our growth in connections and customers in the first quarter of 2009, and consists mainly of increases in marketing, professional fees and installation expense. These increases were partially offset by decreases in compensation expenses and fuel cost. We incurred one-time charges of $310,000 related to travel and other PrairieWave and Graceba integration costs for the three months ended March 31, 2008 which did not occur in 2009. Our non-cash stock compensation expense increased from $572,000 for the three months ended March 31, 2008, to $1.5 million for the three months ended March 31, 2009 as a result of restricted stock grants.
Interest expense. Interest expense decreased from $11.9 million for the three months ended March 31, 2008, to $9.5 million for the three months ended March 31, 2009. The decrease in interest expense is primarily a result of the decline in interest rates on our term loan due to the PrairieWave acquisition and the additional incremental loan due to the Graceba acquisition. As discussed in the Notes to the Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2008, the Company no longer qualifies to use hedge accounting for our interest rate swaps on these debts and we recorded $4.7 million in amortization of deferred loss associated with these derivative instruments for the three months ended March 31, 2009. A gain of $706,000 was recorded on the value of the interest rate swaps for the three months ended March 31, 2009.
On March 14, 2007, the Company entered into an Amended and Restated Credit Agreement (Amended Credit Agreement), which provides for a $580.0 million credit facility, consisting of a $555.0 million term loan and a $25.0 million revolving credit facility. On April 3, 2007, the Company received proceeds of the term loan to fund the PrairieWave acquisition purchase price, refinance the Companys first and second lien credit agreements, and pay transaction costs associated with the transactions. The $555.0 million term loan bears interest at LIBOR plus 2.25% and amortizes at a rate of 1.0% per annum, payable quarterly, with a June 30, 2012 maturity date. As of March 31, 2009, $537.3 million is outstanding under the term loan and $1.8 million is outstanding under the revolving credit facility as unused letter of credits. On April 18, 2007, the Company entered into a new interest rate swap contract to mitigate interest rate risk on a notional amount of $555.0 million. The swap agreement, which became effective May 3, 2007, currently fixes $505.3 million of the $537.3 million floating rate debt at 4.977%.
Net cash used by our investing activities was $90.0 million and $34.8 million for the three months ended March 31, 2008 and 2009, respectively. Our investing activities for the three months ended March 31, 2008 consisted primarily of $75.1 million for the acquisitions of businesses, $14.3 million of capital expenditures and $653,000 of multiple dwelling unit signing bonuses. Investing activities for the three months ended March 31, 2009 consisted primarily of $20.2 million for the purchase of certificates of deposit and $14.6 million of capital expenditures.
Net cash provided by our financing activities was $57.2 million for the three months ended March 31, 2008 and net cash used by financing activities was $10.8 million for the three months ended March 31, 2009. Financing activities for the three months ended March 31, 2008 consisted of $59.0 million in proceeds from long term debt and $171,000 from the exercise of stock options, offset by $1.7 million in principal payments on debt and $205,000 of expenditures related to the issuance of long-term debt. For the three months ended March 31, 2009, financing activities consisted of $10.8 million in principal payments on debt offset by proceeds of $10,000 from the exercise of stock options.
Read the The complete Report
